Chapter 1: FY 2020-21 Budget Overview
1.0 WWU Budget: Chapter Overview
1.1 Introduction
Western’s adopted operating budget represents a resource allocation and plan for the fiscal year (July 1 through June 30), as approved by the Board of Trustees. A budget authorizes use of funds for approved activities, in alignment with strategic plans and goals and core operating needs. It is important to note that a budget is not the same as actual revenues and expenditures, which will be detailed in Chapters 2 and 3. Western’s operating budget is primarily funded through state appropriations, student tuition and fees, and auxiliary enterprises. Each of these funding sources has particular allowed uses and restrictions, and are described in detail in Chapter 2.
Western’s fiscal year 2021 (FY 2021) is marked by the impacts of the COVID-19 pandemic, including in the timing and process of budget development, revenue impacts, and necessary expenditures. Pre-pandemic, the operating budget was nearly evenly split between state-funded activities (supported by state appropriations and tuition revenues) and self-sustaining activities (including auxiliary enterprises like Housing and Dining and fee-supported areas). As part of the university’s COVID-19 response, operations in FY 2021 were primarily remote, with few students living on campus. The most substantial financial impacts occurred in auxiliary areas and were managed with a combination of expenditure reduction, bond refinancing, and federal stimulus support.
Figure 1.1 FY 2020 and FY 2021 Comparison
The original budget plan for FY2021 was included in the biennial budget plan developed in Spring 2018. Assumptions at that time included growth in resident and non-resident students, as well as tuition rate increases and the biennial budget appropriation signed by the governor. As the second year of the biennium, FY2021 also included emergent internal budget priorities and supplemental budget action by the state.
1.2 FY 2021 Budget Development
The FY 2021 operating budget was developed in a time of extreme uncertainty, with the impacts of COVID-19 playing out across all major revenue sources and necessitating new expenditures to protect the university community. After the Governor signed the FY 2021 budget into law, the state revenue forecast projected a $9 billion impact to state revenues over the current and next biennium, and state agencies were asked to plan for a 15 percent reduction to FY 2021 budgets. Enrollment for fall quarter was down 7 to 10 percent overall, with a higher reduction among non-resident undergraduates. As of October 2020, when the final FY 2021 budget was adopted, Western had received a combined $11.2 million in stimulus funding for institutional support through the CARES Act Higher Education Emergency Relief (HEERF) program and the Governors’ Emergency Education Relief (GEER) fund. $2.1 million was committed in FY 2020, leaving $9.1 million available for support in FY 2021 with the possibility of additional federal stimulus pending congressional action. These funds may be used to support both the state operating budget and self-sustaining/auxiliary areas.
Due to this uncertainty, the Board of Trustees adopted a preliminary or “continuation” budget in June to allow operations to continue. In October, the Board adopted a final FY 2021 expenditure budget based on a range of potential revenue scenarios, recognizing that some scenarios would require greater use of institutional reserves.
Key expenditure adjustments in the full FY 2021 operating budget include:
- Both one-time ($2,000,000) and recurring ($285,000) funding to address the budget gap in Academic Affairs and move towards greater fiscal sustainability;
- An increase in recurring funding ($500,000) for IT operating needs following an extensive budget review;
- New investments ($225,000) to support diversity, equity, and inclusion, including recurring funding for an African American Student Retention Counselor, funding for anti-racism and anti-Black racism training coupled with support and wellness initiatives for BIPOC employees, and curriculum development in Ethnic Studies;
- Recurring funding ($100,000) as part of a multi-year plan to bring TA stipends up to the target rate, addressing a barrier to accessing graduate education;
- Investments from the state for tuition reductions at Western on the Peninsulas ($886,000, included in the continuation budget) and for Sexual Assault Prevention at Postsecondary Institutions ($86,000);
- A placeholder amount of $1,000,000 for COVID response activities, such as increased cleaning, adjustments to classroom spaces, investments in technology to support remote instruction and learning, and preventative testing;
- One-time/non-recurring reductions to divisional budgets of 3 percent, to be achieved through holding vacant positions, reducing goods and services purchases, continuing the travel freeze, and recognizing savings from voluntary employee reductions.
For additional information, please see the following:
1.3 Recurring Budget
Recurring budget allocations are made based on funding that Western receives on a recurring or annual basis, such as state appropriations and tuition and fee revenue. Recurring expenditures are expenditures that continue each year, such as permanent employee salaries and benefits, utilities, subscriptions, and program operating costs.
Figure 1.3 Recurring State Budget Allocations
Recurring state budget for each division, which includes all base recurring state budget from the prior year, all mid-year adjustments to the recurring state budget, and new allocations of recurring state budget. The FY2021 temporary 3% reductions to divisional budgets are not reflected here.
Western’s recurring state operating budget has grown steadily based on new state funding for programmatic investments and compensation increases, as well as a trend of enrollment increases through FY2020. The recurring budget is not representative of actual revenues, which are described in Chapter 2, but is informed by revenue trends.
New recurring investments in FY21 are described above. Due primarily to enrollment impacts of Covid-19, WWU is managing a gap between recurring funding and recurring expenditures, with expenditures exceeding revenues.
1.4 One-Time Budget
One-time, or nonrecurring budget is based on funding sources that do not replenish or recur in subsequent years. Because this funding does not renew, it is best used for one-time needs such as a short-term project with a clear end date or a temporary bridge until more sustainable permanent funding is secured. One-time funding typically comes from reserves or positive fund balances. In FY 2021, Western received significant one-time funding in the form of federal stimulus dollars. Both sources, reserves and stimulus, have particular restrictions on their use. Western’s Board of Trustees has identified a target range for reserve balances (described further in Chapter 4), and the federal stimulus funding must be used in particular ways (described further in Chapter 2).
The most significant one-time budget adjustments in FY 2021 were the use of $2 million in bridge funding to help fill the operating deficit in Academic Affairs, application of federal stimulus funding to eligible uses, and a one-time budget reduction of 3 percent to each division, to be achieved through holding vacant positions, reducing goods and services purchases, continuing the travel freeze, and recognizing savings from voluntary employee reductions. These adjustments are part of an overall bridging strategy, intended to allow time to reach a more sustainable alignment of recurring revenues and expenditures.
1.5 Outcomes of State Budget Request
Western received $91.5 million in state allocations for FY 2021. State funding was provided for retirement benefits increases and a collectively bargained and legislatively approved 3 percent compensation increase. The FY 2021 state supplemental budget included $886,000 for Western's decision package to reduce tuition for four-year degree programs offered at WWU on the Peninsulas.
Additionally, the state allocated $87,000 in new recurring funding for the implementation of Engrossed Substitute House Bill 2327 which was a new initiative for addressing sexual misconduct in higher education.
The FY 2021 supplemental budget also included reductions to allocations approved with FY 2020-2021 biennial budget. The state changed its initial appropriation for opioid overdose medication associated with HB 1039 from recurring support to $20,000 in one-time funding for FY 2020, which removed the funding from the budget in FY 2021 and future years. Additionally, $30,000 that was provided in FY 2020 for compensation adjustments was recaptured by the state.
1.6 Contingency Fund Allocations
Western maintains a recurring contingency budget of $1.2 million to address emergency needs that may arise during a given fiscal year. In years where the contingency is not sufficient to meet the need, institutional reserves may be tapped; in years where the need is less than the contingency budget, the unspent funds become part of the institutional reserve. Use of contingency funds require approval by Western’s President on the recommendation of the collective Vice Presidents, coordinated through Budget and Financial Planning.